Ikea plans to expand to a dozen new markets - but no NZ on the list
Thursday, 11 October 2018
Ikea plans to expand to about a dozen new markets in the coming years, including branching into South America, as the Swedish furniture giant aims to reach a total of three billion potential customers by 2025.
The company will in the coming years open stores in Chile, Colombia and Peru through a new Ikea franchisee called Falabella as part of its first foray into South America, Inter Ikea said. Inter Ikea, which owns the Ikea concept and is the worldwide franchisor, also said the company plans to start selling its products in Mexico, Estonia, Ukraine, Puerto Rico, Oman, Luxembourg, Macau and the Philippines.
'By 2025, we have the potential to reach and interact with three billion people,' Inter Ikea chief executive officer Torbjorn Loof said. 'We will offer new and different ways to shop the Ikea product range -- online, in remote locations and in city centres. We will introduce smaller store formats and offer a wide range of flexible and affordable services.
A spokesperson for Ikea said it had no New Zealand news to reveal.
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'Ikea is always exploring opportunities to expand and be more accessible to more people, however we do not currently have confirmed plans to open a store or sell online in New Zealand.'
In January, New Zealand hopes for an Ikea store were elevated when it was revealed architecture, retail design and property consulting firm RCG has been working with the company on a market research project in this country.
More than 19,000 people like a Facebook page 'bring Ikea to New Zealand'.
In 2008, the Environment Court ruled that the company could not be a tenant in the Auckland suburb of Mt Wellington's retail development, Redwoods, because of concerns its popularity would cause traffic chaos.
Hamilton then put its hand up in late 2009 to host an Ikea outlet. Its economic development agency invited Ikea scouts to visit the city, but the response was reported to be lukewarm.
Bodo Lang, head of the University of Auckland Business School marketing department, said it was unlikely New Zealand would get Ikea soon.
He said Ikea was usually in area of at least a million people with an hour's drive.
'We could easily have one such store in New Zealand. But only one. The rest of the country simply is not densely enough populated and IKEA typically does not enter countries where they can only open one store. The investment is simply not worth it.
'What is possible is that Ikea may modify its business model to serve untapped markets, such as New Zealand, in a different type of way. That is, if Ikea has a strong interest in entering the New Zealand market, they may not do so with their traditional mega stores but through alternative touch points. Such a move could be part of their international expansion strategy but would not result in a 'typical' Ikea presence as seen in other countries.'
Ikea is in the midst of a transformation where it's shifting resources toward emerging markets and alternative shopping experiences such as e-commerce and city centre stores to better cater to customers' changing needs.
Total retail sales, which include sales of both products and services, rose to €38.8 billion (NZ$69.29 billion) from €38.3b a year earlier.
In its last fiscal year, India and Latvia became new Ikea markets as the company opened 19 new stores around the world. In its fiscal year 2019, which runs through August, a total of 15 retail locations are planned. That includes a new store that was opened in Bahrain in September, Inter Ikea said.
Ikea's stores, which can be found in more than 50 markets, welcomed 957 million visitors in the last fiscal year. The company now has online stores in 35 markets after its operations in Belgium, Romania and Malaysia introduced e-commerce. The company is also exploring selling its products on external online marketplaces and Loof said he hopes to introduce a collaboration with a digital shopping platform in the coming year.
Ikea's foray into South America will see the company open nine stores and expand online in Chile, Colombia and Peru, through the Falabella franchise, in the coming decade.
'We're very excited to open in South America,' Loof said. 'It will be a faster and bigger expansion than when we've entered new markets before.'
The retailer will need at least 1 million cubic metres of goods in South America to break even, Loof said. Its first store is planned to open in Santiago in Chile in late 2020 and locations in Lima in Peru and Bogota in Columbia will then likely follow, he said.
'Ikea's transformation means franchisees like Falabella have a menu of options to choose from to jump start their expansion, including physical store formats and digital services. That means new Ikea franchisees should be able to 'reach bigger volume faster with lower costs,' Loof said.